Despite the rapid introduction of renewable energy sources into South Africa’s power grid, the country’s reliance on coal as the primary energy source remains indisputable into the foreseeable future. As many eMalahleni-based coal mines ramp down production or plan for closure by 2020, a looming energy crisis seems imminent, writes Laura Cornish.Renewable energy sources are a welcome relief for South Africa – they are clean, and will position the country equally with first world countries already using it extensively. They will also help offset the country’s ostracised carbon footprint reputation. The reality, however, is that South Africa depends on coal for up to 90% of its energy requirements, which will remain unchanged indefinitely on the back of increasing urbanisation and the overall small volume contribution renewable energies will ultimately offer the country. “This leads to an immediate crisis,” says Ian Hall, chairman of the South African Coal Roadmap Society (SACRM). “Our power stations are reaching the end of their lifespans and the coal operations that supply them will reduce production or close entirely around 2020. This means we need to source anywhere between 60 and 120 Mtpa of new coal supply before then to sustain our power stations and growing energy requirements.” “In my opinion, the reality is that we are going to have electricity shortages for the next 15 to 20 years. The scale of investment required to supply even medium growth trajectories for the coal sector is mind-boggling.” However, finding sufficient coal resource is not the dilemma. The updated Coal Resources and Reserves Study of South Africa (CRSSA), not yet released but in final consultation stages, suggests that the country still has over 60 billion tonnes of recoverable coal reserves – enough to continue feeding coal-fired power stations for over 200 years. “But the regulatory process to build a new mine is not aligned between government and stakeholders. It can take up to three years to attain the necessary mining rights and licences to develop a new coal mine. Coupled with the length of time necessary to complete feasibility studies, raise sufficient cash and construct the mine and plant, it appears that seven years to deliver this capacity to Eskom is simply not enough time,” Hall outlines. And those issues are just the beginning. The majority of the 60 billion tonnes lies predominantly in the Waterberg region, which is recognised for its contained coal volume, but also for its poor quality. “The priority will be to wash the coal, in a ‘waterless’ region and transport it to the existing power stations hundreds of kilometres away, which will add significantly to its overall cost.” Excluding Exxaro, companies are only now starting to tap into the potential opportunities in the Waterberg, which requires modern technologies and years of proper evaluation to extract maximum value for minimum cash. It isn’t all bad news though. Eskom is embarking on a coal quality improvement programme and is simultaneously investing heavily in extending the lifespan of its power stations. Transnet Freight Rail is also looking to build a railway line to connect the Waterberg to the eMalahleni area where the majority of the power stations are situated. The construction of a water pipeline is also a priority on the government’s infrastructure development programme. “There is immediate hope if all these issues are resolved and aligned.”
“Right now, however, we need urgent policy decisions on what will be the next baseload power station after Kusile comes on line, amendments to the future generation mix (IRP 2010) and assurance that there is sufficient new mining capacity coming on stream in time.”The third arm to a possible energy crisis is South Africa’s declining investment status, which means companies are not attracted to invest in and develop new mines in the country. “The government’s constant inclination to act on our coal’s strategic mineral status is not aiding the situation. If it does, it means it will control how much coal is sold domestically, and for what price.” Considering almost 75% of local production is used domestically and delivered to Eskom via some of the most advanced beneficiation methods in existence, limiting exported volumes could be dire for the economy. In 2011, coal exports comprised 27.2% of total coal production, contributing R50.5 billion or 57.5% value in foreign revenue. Whether coal remains at the forefront of our energy requirements going forwards or not, it remains a vital necessity, locally and globally. “South Africa will either diversify its energy mix and join the global leaders in emissions mitigation, meaning no further significant investment in the coal or related sectors, or will remain heavily reliant on coal and continue to drive and promote new technologies and coal energy-generating methodologies,” Hall points out. Regardless of the path government, Eskom and stakeholders take, the SACRM has outlined a series of immediate, short-to-medium and longer term actions required:
|Immediate actions||Eskom requires some +60 Mtpa of new capacity before 2020|
|Secure contracts for coal supply to existing and new power stations||Agreement on an appropriate coal pricing model to EskomEarly infrastructure planning if coal for power stations is to be sourced from the Waterberg|
|Create an environment conducive to mining investment||Aligning policy and legislation processes for establishment of new minesObtaining clarity on carbon taxMPRDA amendments and practical implications if coal is declared a strategic resource|
|Resolve Central Basin coal supply and transport challenges||Acceleration of Eskom’s current road-to-rail migration and conveyor infrastructure programmeIdentifying alternative employment opportunities for coal truck drivers who are thereby displaced|
|Short-to-medium term actions||Plan for the next coal baseload power stations, if nuclear and renewables are not achieved at required scale or on scheduleEnsure that the value of South Africa’s significant coal endowment is maximised for the benefit of its citizens|
|Track progress on delivery of the IRP 2010 build programme and develop contingency plans||Obtain clarity on nuclear and renewables build plans, and the role of gas should these fail to eventuateEncourage finalisation of a revised Integrated Resource Plan with clarity on new capacity build|
|Finalise the location of any further coal-fired power stations to enable timeous infrastructure decisions||Additional infrastructure will be required to transport coal (including exports) from the WaterbergEarly planning ensures that infrastructure is appropriately sizedDecisions and securing of funding for infrastructure are required immediately in the case of water supply and in the near future in the case of railAdequate human settlements planning must be made|
|Capitalise on coal exports||Maximise coal exports and foreign revenues – exploit position as key supplier to meet demand from East and WestExpand rail and port infrastructureProvide a supportive investment climate|
|Accelerate transformation of the sector||Explore new business modes that involve cooperative partnerships between Eskom or the existing large mining houses and smaller playersWith Eskom funding and existing mining know-how, new mines for supply to the utility sector may provide a platform for start-up of more black-owned minesThe state mining company may also play a role in such development|
|Manage environmental impacts, including legacy issues and increase efficiency of mining||Coordinated whole systems planning, including impacts on waterImproved management of coal dust, discard, spoils and mine rehabilitationAdvancement in cost and water efficient mining and beneficiation, including dry beneficiation technologies and use of discards/finesDevelopment and introduction of safer mining techniquesMaintain and develop skills to operate mines and power stations of the future|
- To serve as a fact-based overview of the current South African coal industry – including a review of national and international issues affecting coal across all elements of the value chain.
- A platform for the sharing and dissemination of knowledge – to align all stakeholders and their objectives and collectively support societal and economic objectives: accelerated growth, employment, environmental responsibility, capital and social investment.
- Use scenarios to evaluate the impact of various trajectories and signals that a particular future is evolving.
- A fact-based analysis, which aims to support policymakers and stakeholders going forward, together with some common actions to be undertaken for coal to contribute to a flourishing South Africa.